3 Stocks Pushing The Internet Industry Lower

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

The Internet industry as a whole closed the day up 0.3% versus the S&P 500, which was down 0.1%. Laggards within the Internet industry included Professional Diversity Network ( IPDN), down 5.5%, Selectica ( SLTC), down 1.8%, ChinaNet Online Holdings ( CNET), down 3.0%, BroadVision ( BVSN), down 1.6% and Taomee Holdings ( TAOM), down 1.8%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

ChinaNet Online Holdings ( CNET) is one of the companies that pushed the Internet industry lower today. ChinaNet Online Holdings was down $0.02 (3.0%) to $0.81 on light volume. Throughout the day, 9,400 shares of ChinaNet Online Holdings exchanged hands as compared to its average daily volume of 52,100 shares. The stock ranged in price between $0.81-$0.84 after having opened the day at $0.81 as compared to the previous trading day's close of $0.84.

ChinaNet Online Holdings, Inc., through its subsidiaries, provides business-to-businesses Internet services for small and medium enterprises (SMEs) sales networks in the People's Republic of China. ChinaNet Online Holdings has a market cap of $19.2 million and is part of the technology sector. Shares are down 0.6% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates ChinaNet Online Holdings as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

Highlights from TheStreet Ratings analysis on CNET go as follows:

  • Compared to its closing price of one year ago, CNET's share price has jumped by 33.33%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • CNET's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CNET has a quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The revenue fell significantly faster than the industry average of 14.6%. Since the same quarter one year prior, revenues fell by 27.3%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Media industry and the overall market, CHINANET ONLINE HOLDINGS's return on equity is below that of both the industry average and the S&P 500.
  • CHINANET ONLINE HOLDINGS reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CHINANET ONLINE HOLDINGS reported lower earnings of $0.13 versus $0.15 in the prior year.

You can view the full analysis from the report here: ChinaNet Online Holdings Ratings Report

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At the close, Selectica ( SLTC) was down $0.11 (1.8%) to $5.86 on light volume. Throughout the day, 3,505 shares of Selectica exchanged hands as compared to its average daily volume of 7,000 shares. The stock ranged in price between $5.81-$5.94 after having opened the day at $5.94 as compared to the previous trading day's close of $5.97.

Selectica, Inc. provides cloud-based software solutions for companies in the United States, Canada, India, New Zealand, Switzerland, and the United Kingdom. Selectica has a market cap of $28.8 million and is part of the technology sector. Shares are down 6.9% year-to-date as of the close of trading on Wednesday. Currently there is 1 analyst who rates Selectica a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Selectica as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on SLTC go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 51.4% when compared to the same quarter one year ago, falling from -$2.09 million to -$3.17 million.
  • The gross profit margin for SELECTICA INC is currently lower than what is desirable, coming in at 34.43%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -89.46% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$1.68 million or 168.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio of 1.03 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, SLTC's quick ratio is somewhat strong at 1.38, demonstrating the ability to handle short-term liquidity needs.
  • SLTC's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 29.23%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

You can view the full analysis from the report here: Selectica Ratings Report

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Professional Diversity Network ( IPDN) was another company that pushed the Internet industry lower today. Professional Diversity Network was down $0.23 (5.5%) to $3.93 on light volume. Throughout the day, 947 shares of Professional Diversity Network exchanged hands as compared to its average daily volume of 4,900 shares. The stock ranged in price between $3.93-$4.20 after having opened the day at $4.20 as compared to the previous trading day's close of $4.16.

Professional Diversity Network, Inc. operates online professional networking communities with career resources in the United States. Professional Diversity Network has a market cap of $25.9 million and is part of the technology sector. Shares are down 9.8% year-to-date as of the close of trading on Wednesday. Currently there is 1 analyst who rates Professional Diversity Network a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Professional Diversity Network as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on IPDN go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, PROFESSIONAL DIVERSITY NETWK's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.35 million or 138.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • IPDN has underperformed the S&P 500 Index, declining 8.88% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for PROFESSIONAL DIVERSITY NETWK is currently very high, coming in at 70.44%. Regardless of IPDN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IPDN's net profit margin of -21.24% significantly underperformed when compared to the industry average.
  • PROFESSIONAL DIVERSITY NETWK reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PROFESSIONAL DIVERSITY NETWK swung to a loss, reporting -$0.23 versus $0.27 in the prior year. This year, the market expects an improvement in earnings (-$0.19 versus -$0.23).

You can view the full analysis from the report here: Professional Diversity Network Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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